Reap up the rent! Rental prices across North Carolina rose by 20% between February 2021 and February 2022.
You can make tens of thousands a month off of your tenants. One way you can increase your profit is through security deposits. But before you start asking for deposits from your applicants, you need to familiarize yourself with good practices for deposits.
What can you use security deposits for? What laws affect your deposits? How can you smooth things over with your renters so they pay deposits?
Answer these questions and you can make rental management easy and profitable. Here is your quick guide.
Uses for Security Deposits
Landlords collect rental deposits to ensure that tenants abide by their lease agreements. If a tenant follows their lease, they can get their deposit returned to them when they leave.
Landlords are not required to collect security deposits. But most successful landlords do, as they create incentives for tenants to follow their leases.
If a tenant violates their agreement, the landlord can keep the deposit. They can also use the deposit to pay for damaged property or a missed rental payment.
Click here to see 5 reasons why every landlord should use rent collection services.
Deposit Limits
The Tenant Security Deposit Act imposes limitations on all security deposits in North Carolina. If a tenancy is on a week-to-week timescale, you can only collect a deposit equal to two weeks of rent.
If the tenancy is on a month-to-month contract, you can collect up to one and a half months of rent. But if your tenant is renting your property for the year, you can collect two months of rent right away. You can also charge a pet deposit if your tenant moves in with a pet.
You must secure the money in case your tenant moves out. You must supply the money to them within 30 days of them leaving.
Tips for Choosing the Right Amount
You may be tempted to charge the maximum amount of money you can. However, this can be a high rate if your rent payments are already expensive. One month of rent gives you enough money to pay for damages without scaring potential tenants away.
You should think about the rental valuation. A more valuable property should lead to a higher security deposit, as you need more money to renovate the property.
Be clear with your tenant about what you may use their money for. This can make you seem transparent and help you develop trust with your tenant. During their tenancy, you can send them bank statements showing that you have not spent their money.
The Essentials of Security Deposits
Security deposits are trickier than they seem. You can use them to repair your property and compensate yourself if your tenant misses the rent.
However, North Carolina laws cap how much you can charge your tenants. You must return the deposit once your tenant moves out.
Charge a moderate amount that reflects the value of your property. Talk to your applicants and tenants so they know where their money is and how they will get it back.
You don't have to handle rental deposits on your own. Carolina Property Management helps Charlotte-area landlords with their properties. Contact us today.
If you own rental property, you should read this to learn why you need professional help around the clock. https://carolinaspropertymanagement.com/blog/landlords-need-professional-247-support-with-rental-properties
